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Monday, 7 November 2011
Page: 8447

Carbon Pricing

(Question No. 1219)

Senator Boswell asked the Minister representing the Minister for Climate Change and Energy Efficiency, upon notice, on 19 September 2011:

(1) Is the proposed carbon pricing scheme better described as a regulatory approach or a market-based policy.

(2) Does the Minister agree that carbon markets are regulatory interventions.

Senator Wong: The Minister for Climate Change and Energy Efficiency has provided the following answer to the honourable senator's question:

(1) The carbon pricing scheme is better described as a market-based policy.

The Clean Energy Future Plan puts a price on carbon pollution. Market participants factor in this price when making investment and consumption decisions. Business and

consumers will respond to this carbon price incentive in a variety of ways, such as using new processes or technologies. This changes behaviour across the economy which means that least cost abatement options are able to be pursued in favour of higher cost abatement, when identified by businesses and households.

In contrast, regulatory approaches are characterised by a reliance on institutional bodies (such as the Government) to direct investment and consumption decisions of individuals and businesses, for example through subsidies or bans. The Government does not have as much information about the relative costs of abatement as individual firms and households, and would miss opportunities for cost-effective abatement if it were to rely solely on regulatory measures. This will impose higher costs than necessary on the economy.

(2) A carbon price is a market-based policy.